Gold has long been associated with magic, and nowhere is this more evident than in monetary politics. Gold is the closest thing there is to global money. Gold had a major role in the trend toward globalization a century ago. Yet gold also has staunch supporters among the outspoken opponents of globalization. Some of the same people who call for the repeal of all international trade arrangements are also calling for the adoption of the “gold standard,” that is, giving gold the official status of money. The magic of gold will apparently overcome this contradiction.
Part of the appeal of money made from gold is that the value of gold is not easily manipulated. It is affected daily by events everywhere in the world, so it is not able to be controlled by anyone one country or any business located at a particular place in the world. But this also means that everyone is at the mercy of events elsewhere when it comes to the value of gold. One spectacular gold find anywhere in the world, or the first mining expedition to the asteroid belt, could cause unpredictable and uncontrollable inflation everywhere in the world, if the world’s money were tied to the value of gold.
The history of gold as money is riddled with hugely unpleasant episodes. Gold is deflationary at times when the working population expands faster than the supply of gold, which is most of the time, but it becomes abruptly inflationary with no advance warning whenever the gold supply increases. This created, over the ages, boom and bust cycles that make our recent experiences with boom and bust look tepid by comparison. The global nature of the gold supply means that economic expansion in one geographical area is likely to be accompanied by depression in other areas. As a global commodity, gold is not subject to the rule of law, so when gold was money, pirates and bandits had an outsized influence on economic matters.
The outlaw quality of gold is part of its appeal. If you have gold, you are rich, rich enough to thumb your nose at the law. If one country tries to use laws to control your behavior, you can go to another country. This, though, is just what people complain about in multinational corporations. It goes to show that you cannot tie money to gold without unleashing the worst effects that globalization has to offer.
Money, ultimately, is too flexible, too magical, to be tied to something as mundane as any single material. Fundamentally, money is the effect of spiritual forces such as intention and imagination. If there were no hope and no new ideas, then perhaps gold might serve as money again — but only temporarily. The truth is, money outgrew gold a long time ago.
